Smartphone sales slow down amid better phones, contract rules

If you're buying a smartphone for someone this Christmas, it won't just be the recipient who's thankful — but likely the entire industry. Smartphone sales slowed this year, and will shrink even further in the years to come, market research firm IDC reports.

Apple responds with $32 US per month plan to help users upgrade yearly

The growth of smartphone sales is expected to slow in Canada next year, according to a new report from a market research firm. (Philippe Huguen/AFP/Getty Images)

If you're buying a smartphone for someone this Christmas, it won't just be the recipient who's thankful — but likely the entire industry. That's because growth in smartphone sales actually slowed this year, market research firm IDC reports, and is expected to shrink even further in the years to come.

In a forecast released earlier in December, IDC said worldwide shipments of smartphones grew by 9.8 per cent in 2015. That's the first time since IDC started tracking smartphone sales that growth has been in the single digits. By way of comparison, IDC says global smartphone sales grew by 28 per cent in 2014.

In Canada, IDC predicts smartphone sales will shrink by 7.5 per cent in 2016. And their forecast says that's a trend that will likely continue for the next several years.

That doesn't surprise industry watcher Daniel Bader, who is editor-in-chief of the tech website MobileSyrup.

Users are holding on to smartphones longer, rather than frequently replacing them, according to one industry watcher. (Aaron Harris/Bloomberg News)
"Phones are lasting longer, and the replacement cycle has lengthened considerably over the last two or three years," he said. 

"So people are comfortable holding on to their phones because it's so important to them. It's annoying to replace your phone."

Bader says the inconvenience of losing phone settings and other issues that come with switching phones can be a deterrent for consumers, who feel they already have a perfectly useable phone.

Used phone market may be growing

But there are other reasons new smartphone sales are slowing, according to Bader. He says the market for used phones through sites like Craigslist and Kijiji is impossible for the industry to track, but he believes it's considerable — and growing.

Changes in recent years to cellphone contracts may also be having an impact on sales.

In 2013, the CRTC shortened the maximum length of cellphone contracts from three years to two years. Bader says it was expected that people would upgrade more often, but the change actually made it less desirable for some.

"The carriers took that opportunity to force you to change your plan, so if you want to buy a brand new phone you can't hold on to your $30, $40-a-month plan any more. You have to get a $70 plan, an $80 plan," he said.

"You may have to double the amount you pay every month, and for many people that's untenable."

That, says Bader, is why the wireless industry has responded by introducing financing plans, which they hope will convince people to upgrade.

Apple is one company that offers users an option to buy a new phone on an instalment plan, but not in Canada. (Kiichiro Sato/Associated Press)
For example, Apple offers users an option to upgrade their iPhone every year, for a charge of $32 US per month. Several American wireless providers offer similar installment plans for new phones.

Smaller companies in some Canadian markets offer installment payment programs, but the three major national carriers — Bell, Rogers and Telus — haven't followed suit.

Bader says it's in the interests of a company like Apple to make sure they eventually do, because it reflects well on their sales numbers.

"Apple gets a new phone purchased every year, you don't spend a lot of money up front on a brand new iPhone — which is often a $500 or $600 proposition," he said.

"And those stats continue to get checked off. Apple says 'We sold x-number of million iPhones last year,' and that's a direct result of introducing these financing plans."

But while sales of the devices themselves may be softening, in a report issued earlier this year, the CRTC said household spending on internet and wireless services rose in Canada last year.

In the first of its three-part 2015 Communications Monitoring Report, the CRTC said Canadian households spent an average of $203 per month on their communication services in 2014. That was up about $12 per month — or 6.2 per cent — from 2013.

The largest spending increase was on mobile services, which rose from a household average of $69 in 2013 to $79 in 2014.


Jason Osler is the national 'trends' columnist for CBC Radio.


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